#9- MGT447 Online Retail and Services Laudon 9e Ch09 20-03-24 (1).ppt

Chapter 9 Online Retail and Services Online retail or online shopping refers to a form of electronic commerce where consumers directly buy goods or services from a seller via the Internet rather than physically ent...

Chapter 9 Online Retail and Services Online retail or online shopping refers to a form of electronic commerce where consumers directly buy goods or services from a seller via the Internet rather than physically entering a brick-and- mortar store. Customers usually visit the company's website, select a product, enter payment information and shipping details, and then order the product. Copyright © 2013 Pearson Education, Inc.  Major Trends in Online Retail, 2012–2013 Mobile commerce nearly doubles Rapid growth in social commerce Online retail still the fastest growing retail channel Buying online a normal, mainstream experience Selection of goods increases, includes luxury goods Informational shopping for big-ticket items expands Specialty retail sites show rapid growth Integration of multiple retailing channels Copyright © 2013 Pearson Education, Inc. Slide 9-2  Major Trends in Online Retail, The major trends in online retail from 2020 to 2024: 2020–2024 E-commerce growth accelerated due to the COVID- 19 pandemic. Mobile shopping continued to dominate, with increased use of smartphones and tablets. Omnichannel retailing integrated online and offline channels for a seamless shopping experience. Personalization and customer experience were prioritized through tailored recommendations and promotions. Copyright © 2013 Pearson Education, Inc. Slide 9-3 Major Trends in Online Retail, 2020–2024 The major trends in online retail from 2020 to 2024: Social commerce and influencer marketing gained prominence. Sustainability and ethical consumerism influenced purchasing decisions. Augmented Reality (AR) and Virtual Reality (VR) enhanced the online shopping experience. Voice commerce expanded through voice-activated assistants and smart speakers. Same-day and fast delivery options became more common. Data security and privacy measures were strengthened to protect consumer information. Copyright © 2013 Pearson Education, Inc. Slide 9-4  The Retail Sector Most important theme in online retailing is effort to integrate online and offline operations U.S. retail market accounts for $11.1 trillion (71%) of total GDP Personal consumption:  Services: 66%  Nondurable goods: 23%  Durable goods: 11% “Goods” vs. “services” ambiguity Copyright © 2013 Pearson Education, Inc. Slide 9-5  The Retail Industry 7 segments (clothing, durable goods, etc.)  For each, uses of Internet may differ Information vs. direct purchasing General merchandisers vs. specialty retailers Mail order/telephone order (MOTO) sector most similar to online retail sector  Sophisticated order entry, delivery, inventory control systems Copyright © 2013 Pearson Education, Inc. Slide 9-6  E-commerce Retail: The 1. find lowest prices Vision Reduced search and transaction costs; customers able to 2. Lowered market entry costs, lower operating costs, higher efficiency 3. Traditional physical store merchants forced out of business 4. Some industries would be disintermediated Few of these assumptions were correct—the structure of the retail marketplace has not been revolutionized Internet has created new venues for multi- channel firms and supported a few pure-play merchants Copyright © 2013 Pearson Education, Inc. Slide 9-7  The Online Retail Sector Today Smallest segment of retail industry (5–6%) Growing at faster rate than offline segments Revenues have resumed growth Around 72% of Internet users bought online in 2012 Primary beneficiaries:  Established offline retailers with online presence (e.g., Staples)  First mover dot-com companies (e.g., Amazon) Copyright © 2013 Pearson Education, Inc. Slide 9-8  Multi-channel Integration Integrating Web operations with traditional physical store operations  Provideintegrated shopping experience  Leverage value of physical store Types of integration  Online order, in-store pickup  Web promotions to drive customers to stores  Gift cards usable in any channel Increasing importance of mobile devices, social commerce, and tablets Copyright © 2013 Pearson Education, Inc. Slide 9-9  Analyzing the Viability of Online Firms Economic viability:  Ability of firms to survive as profitable business firms during specified period (i.e., 1–3 years) Two business analysis approaches:  Strategic analysis Focuses on both industry as a whole and firm itself  Financial analysis How firm is performing Copyright © 2013 Pearson Education, Inc. Slide 9-10  Strategic Analysis Factors Key industry strategic factors  Barriers to entry  Power of suppliers  Power of customers  Existence of substitute products  Industry value chain  Nature of intra-industry competition Firm-specific factors  Firm value chain  Core competencies  Synergies  Technology  Social and legal challenges Copyright © 2013 Pearson Education, Inc. Slide 9-11  Financial Analysis Factors Statements of Operations  Revenues  Cost of sales  Gross margin  Operating expenses  Operating margin  Net margin Pro forma earnings—EBITDA Balance sheet  Assets, current assets  Liabilities, current liabilities, long-term debt  Working capital Copyright © 2013 Pearson Education, Inc. Slide 9-12  E-tailing Business Models Virtual merchant  Amazon Bricks and clicks  Walmart, J.C. Penney, Sears Catalog merchant  Lands’ End, L.L. Bean, Victoria’s Secret Manufacturer-direct  Dell Copyright © 2013 Pearson Education, Inc. Slide 9-13  E-commerce in Action: Vision: Amazon.com  Earth’s biggest selection, most customer-centric Business model:  Retail, Third-Party Merchants, and Amazon Web Services (merchant and developer services) Financial analysis:  Continued explosive revenue growth, profitable Strategic analysis/business strategy:  Maximize sales volume, lower costs and cut prices, acquisitions, mobile shopping, Kindle Strategic analysis/competition:  Online and offline general merchandisers, Web services Copyright © 2013 Pearson Education, Inc. Slide 9-14  E-commerce in Action: Strategic Amazon.com analysis/technology:  Largest, most sophisticated collection of online retailing technologies available Strategic analysis/social, legal:  Sales tax, patent lawsuits Future prospects:  In2011, net sales grew 40%, and significant gains thus far in 2013  Ranks among top five in customer service, speed, accuracy Copyright © 2013 Pearson Education, Inc. Slide 9-15  Common Themes in Online Retailing Online retail fastest growing channel on revenue basis Profits for startup ventures have been difficult to achieve Disintermediation has not occurred Established merchants need to create integrated shopping experience to succeed online Growth of online specialty merchants, e.g. Blue Nile Extraordinary growth of social, local, and mobile e-commerce Copyright © 2013 Pearson Education, Inc. Slide 9-16  The Service Sector: Offline and Online Service sector:  Largest and most rapidly expanding part of economies of advanced industrial nations  Concerned with performing tasks in and around households, business firms, and institutions Includes doctors, lawyers, accountants, business consultants, etc.  Employs 4 out of 5 U.S. workers  75% of economic activity Copyright © 2013 Pearson Education, Inc. Slide 9-17  Service Industries Major service industry groups:  Finance  Insurance  Real estate  Travel  Professional services—legal, accounting  Business services—consulting, advertising, marketing, etc.  Health services  Educational services Copyright © 2013 Pearson Education, Inc. Slide 9-18  Service Industries Two categories  Transactionbrokers  Hands-on service providers Features:  Knowledge- and information-intense Makes them uniquely suited to e-commerce applications  Personalization and customization Leveldiffers depending on type of service, e.g., medical vs. financial Copyright © 2013 Pearson Education, Inc. Slide 9-19  Online Financial Services Example of e-commerce success story, but success is somewhat different from what had been predicted Brokerage industry transformed 62% of customers prefer online banking Effects less powerful in insurance, real estate Multi-channel, established financial services firms continue to show growth Copyright © 2013 Pearson Education, Inc. Slide 9-20  Financial Service Industry Trends Two important global trends Industry consolidation FinancialReform Act of 1998 amended Glass-Steagall Act and allows banks, brokerages, and insurance firms to merge Movement toward integrated financial services Financial supermarket model Copyright © 2013 Pearson Education, Inc. Slide 9-21  Industry Consolidation and Integrated Financial Services Figure 9.3, Page 605 Copyright © 2013 Pearson Education, Inc. Slide 9-22  Online Financial Consumer Behavior Consumers attracted to online financial sites because of desire to save time and access information rather than save money Most online consumers use financial services firms for mundane financial management  Check balances  Pay bills Number of people using mobile devices for financial services is surging Copyright © 2013 Pearson Education, Inc. Slide 9-23  Online Banking and Brokerage Online banking pioneered by NetBank and Wingspan; no longer in existence Established brand-name national banks have taken substantial lead in market share 107 million people use online banking; expected to rise to 116 million by 2014 Early innovators in online brokerage (E*Trade) have been displaced by established brokerages (Fidelity, Schwab) Copyright © 2013 Pearson Education, Inc. Slide 9-24  Multi-channel vs. Pure Online Financial Service prefer Online consumers Firms multi- channel firms with physical presence Multi-channel firms  Growing faster than pure online firms  Lower online customer acquisition costs Pure online firms  Cannot provide all services that require face-to- face interaction Copyright © 2013 Pearson Education, Inc. Slide 9-25  Financial Portals and Account Aggregators Financial portals  Comparison shopping services, independent financial advice, financial planning  Revenues from advertising, referrals, subscriptions  e.g., Yahoo! Finance, Quicken.com, MSN Money Account aggregation  Pulls together all of a customer’s financial data at a personalized Web site  e.g., Yodlee: provides account aggregation technology  Privacy concerns; control of personal data, security, etc. Copyright © 2013 Pearson Education, Inc. Slide 9-26  Online Mortgage and Lending Services Earlyentrants hoped to simplify and speed up mortgage value chain Three kinds of online mortgage vendor today  Established online banks, brokerages, and lending organizations  Traditional mortgage vendors  Pure online mortgage firms Online mortgage industry has not transformed process of obtaining mortgage  Complexity of process Copyright © 2013 Pearson Education, Inc. Slide 9-27  Online Insurance Services Online term life insurance:  One of few online insurance with lowered search costs, increased price comparison, lower prices  Commodity Most insurance not purchased online Online industry geared more toward  Product information, search  Price discovery  Online quotes  Influencing the offline purchasing decision Copyright © 2013 Pearson Education, Inc. Slide 9-28  Online Real Estate Services Early vision: Disintermediation of a complex industry However, major impact is influencing of purchases offline  Impossible to complete property transaction online  Main services are online property listings, loan calculators, research and reference material, with mobile apps increasing Despite revolution in available information, there has not been a revolution in the industry value chain Copyright © 2013 Pearson Education, Inc. Slide 9-29  Online Travel Services One of the most successful B2C e- commerce segments Online travel bookings declined slightly due to recession but expected to grow to $150 billion in 2016 For consumers: More convenience than traditional travel agents For suppliers: A singular, focused customer pool that can be efficiently reached through onsite advertising Copyright © 2013 Pearson Education, Inc. Slide 9-30 Online Travel Services (cont.) Travel an ideal service/product for Internet  Information-intensive product  Electronic product—travel arrangements can be accomplished for the most part online  Does not require inventory  Does not require physical offices with multiple employees  Suppliers are always looking for customers to fill excess capacity  Does not require an expensive multi-channel presence Copyright © 2013 Pearson Education, Inc. Slide 9-31  Insight on Business: Class Discussion Zipcar Shifts into High Gear What is the Zipcar business model? How does it make money? How does Zipcar use the Internet? Does Zipcar compete with traditional car rental firms? Will Zipcar work only in urban markets? Can it expand to the suburbs? Copyright © 2013 Pearson Education, Inc. Slide 9-32  The Online Travel Market Four major sectors:  Airlinetickets  Hotel reservations  Car rentals  Cruises/tours 57% purchase airline tickets from airline’s Web site, 22% from travel booking Web site (e.g., Expedia) Corporate online-booking solutions (COBS) Copyright © 2013 Pearson Education, Inc. Slide 9-33  Online Travel Industry Dynamics Intense competition among online providers Price competition difficult Industry consolidation Industry impacted by meta-search engines  Commoditize online travel Mobile applications are also transforming industry Social media content, reviews have an increasing influence on travel purchases Copyright © 2013 Pearson Education, Inc. Slide 9-34  Online Career Services Top sites generate over $1 billion annually Two main players: CareerBuilder, Monster Traditional recruitment tools:  Classified, print ads, career expos, on-campus recruitment, staffing firms, internal referral programs Online recruiting  More efficient, cost-effective, reduces total time-to-hire  Enables job hunters to more easily distribute resumes while conducting job searches  Ideally suited for Web due to information-intense nature of process Copyright © 2013 Pearson Education, Inc. Slide 9-35  It’s Just Information: The Ideal Web Business? Recruitment ideally suited for the Web  Information-intense process  Initial match-up doesn’t require much personalization Saves time and money for both job hunters and employers One of most important functions:  Ability to establish market prices and terms (online national marketplace) Copyright © 2013 Pearson Education, Inc. Slide 9-36  Online Recruitment Industry Trends Consolidation Diversification: Niche employment sites Localization:  Local vs. national, Craigslist Job search engines/aggregators:  “Scraping” listings Social networking:  LinkedIn; Facebook apps Mobile Web sites and apps Copyright © 2013 Pearson Education, Inc. Slide 9-37